Home Sales Tick Up
Home sales tick up as data for the winter continues to surprise on the upside. With home buyers still looking to purchase homes at record paces, November existing and new home sales increased. This is a trend that the real estate market has followed enjoyed for three months in a row now. Many home buyers are looking to lock in mortgage rates before the cost to borrow increases in the new year. Those looking to purchase homes are beginning to understand the risks of waiting to lock in their purchases, as even the slightest increase in mortgage rates can lead to much more expensive borrowing. Here is why homes sales tick up in order to lock in mortgage rates.
Existing Home Sales
With residential home sales data continuing to surprise and beat expectations, we have seen an already tight real estate market become more competitive. In November, existing-home sales, or sales of homes previously owned, rose 1.9% compared to October. While month-to-month sales have increased at the end of 2021, year-over-year sales have actually decreased. The sales from this November compared to last November are actually down 2%. This is largely due to the lack of supply to keep up with buyer demand, especially after a record increase in home buyers over the past twelve months.
Buyers Are Motivated
With buyers determined to land their dream homes before mortgage rates inevitably increase, a slight dip in mortgage rates created a frenzy of buying. Rates dipped slightly in November as the omicron variant and other outside forces impacted the rates market. Buyers want to lock in a set mortgage rate and be able to get an estimate of how much they will owe monthly. Mortgage rates and home prices have increased throughout the year, making it harder for some buyers to make the step towards homeownership. Rents have also escalated, making the cost of any type of residence increasing more challenging. Throughout the nation, according to many of the top real estate economists, mortgage rates are predicted to increase. While this increase won’t be overly dramatic, and with rates remaining at sub-4%, mortgages will still be obtainable.
Home Sales Will Be At Higher Prices
Higher home prices are continuing to be priced in for the next year as well. What we saw in 2021 in terms of home price increases is likely to be a thing of the past. While these 2021 home price increases will hold, the rate of increase in 2022 will be lower. However, with home prices increasing around 16% in 2021, a 4% increase in 2022 would lead to a 20% increase in 24 months.
This is some of the fastest price acceleration in the real estate market that we have seen since The Great Inflation in the 1970s. With predictions from NAR coming in at near 6% in terms of price increases, homeowners look to have gained over 20% equity. There are many ways to take advantage of this equity increase as well. With increased home equity comes a higher net worth and a better sense of value for homeowners.
Home Sales And Inventory
With record low inventories looking to be a persistent problem coming into the new year, homes will remain hard to come by. The total number of homes listed for sale fell 10% in November compared to October. Inventories also are significantly lower than they were this time last year. In fact, housing inventories are sitting 13.3% lower than compared to November 2020. With supply chains impacting builders and contractors, new construction housing inventory will also continue to be low. With some basic economic principles in play, prices of homes and the costs associated to build them will continue to rise.
Quick Sales To Continue
Finally, with homes hard to come by in 2022, we can expect to see a continue in the trend of homes selling fast. With over 80% of homes for sale in November selling in less than a month, we can expect to see this in the new year. One major reason for homes selling this quickly is because of the low inventory mentioned before. With low inventory (supply), and many motivated buyers (demand), homes will continue to fly off the shelf, or in this case, the market. The average days-to-sell in November 2021 was as low as it has been all year. Homes sold, on average, in 18 days from the list date. This is down 3 whole days from the last year. With the home sales tick up in November, expect to see similar numbers for December, with data adjusted based on holidays.